TIDMECK
RNS Number : 8932O
Eckoh PLC
15 June 2022
15 June 2022
Eckoh plc
("Eckoh" or the "Group")
Full year results
- Group and US ARR growing strongly
- Transformational Syntec acquisition progressing well
- Expectation of material growth in FY23
Eckoh plc (AIM: ECK), the global provider of Customer Engagement
Security Solutions, is pleased to announce results for the twelve
months to 31 March 2022.
GBPm (IFRS unless otherwise stated) FY22 FY21 Change
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Revenue 31.8 30.5 +4%
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Gross profit 25.4 24.2 +5%
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US Secure Payments ARR ($m) (1) 11.9 6.5 +82%
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Total ARR(1) 25.2 17.0 +48%
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Adjusted EBITDA(2) 6.8 6.4 +7%
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Adjusted operating profit(3) 5.2 4.7 +10%
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Profit before taxation 2.3 3.5 (34%)
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Adjusted earnings pence per share(4) 1.57 1.49 +5%
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Adjusted diluted earnings pence
per share(4) 1.34 1.45 (8%)
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1. ARR is the annual recurring revenue of all contracts billing
at the end of the period. Included within Group ARR is all revenue
that is contractually committed and an element of UK revenue that
has proven to be repeatable, but not contractually committed.
2. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit before tax adjusted for
depreciation of owned and leased assets, amortisation of intangible
assets, expenses relating to share option schemes, restructuring
costs and transactional costs.
3. Adjusted operating profit is the profit before tax adjusted
for amortisation of acquired intangible assets, expenses relating
to share option schemes, restructuring and transactional costs
4. Adjusted earnings pence per share - the Group issued 36.2m
new ordinary shares during the year in connection with the
acquisition of Syntec which results in an increase in the weighted
average shares in issue across the period.
Strategic highlights
-- Strong ARR(1) growth, especially in the US market, driven
primarily by our clients' need to protect data and comply with
increasing regulation without compromising customer experience
-- UK business returned to growth with strong second half
revenues as most client activity recovered
-- Transformational Syntec acquisition performing in line with
our expectations with integration on track
o Unification and enhancement of product offering on track for
go-to-market launch in 2022
-- As part of our long-term strategic direction, multi-platform
cloud-enablement of our offering is driving:
o Market leadership and competitive advantage
o Scalability into larger client opportunities on an
international basis, characterised by recent contracts
o Significant cross-sell opportunities and faster deployments
will drive increased client value
-- Realignment of sales capability and go-to-market proposition
to drive top-line growth, and restructuring of cost base to create
greater operational efficiency
Current trading and Outlook
-- Current order levels already substantially exceed FY22's first quarter outcome
-- Significant strengthening of Eckoh's new business pipeline in
the first quarter, including major opportunities for large
blue-chip organisations
o Progress reflects success with our strategy to pursue larger,
higher quality opportunities through management action to improve
sales function
o Renewals post-period end includes our largest contract
scheduled for FY23, worth GBP2.1m
-- First client deployed and live on our new Azure cloud
platform signed new 3-year contract worth $1.4m for voice security
and a further contract worth $0.6m to secure live chat agents with
digital payments
-- As previously stated, the Board expects FY23 revenue and
profit to be significantly higher than FY22, driven by strong
organic ARR growth, operational efficiencies and synergistic
benefits of the Syntec integration
-- The Board is confident of further progress in the year ahead,
supported by an encouraging pipeline, a model with high recurring
revenues and a robust balance sheet.
Financial highlights
-- Strong performance, as previously announced in Trading Update on 17 May 2022
-- Group ARR(1) up 48%, reflecting market opportunity and ongoing shift to cloud
-- Adjusted operating profit(3) up 10% with successful pivot to
higher quality earnings following the completed exit from US and UK
Support, which contributed GBP2m to FY21 adjusted operating
profit
-- US Secure Payments performed strongly:
o Revenue up 8%, underlying growth stronger
o US ARR(1) up 38% on an organic basis and 82% including
Syntec
-- UK revenues returned to growth with transactional volumes
largely returned to pre-pandemic levels
o Revenue up 9%, excluding third-party support or 3% total
o UK ARR(1) of GBP16.5m, up 8% on an organic basis and up 36%
including Syntec
-- Profit before taxation includes GBP1.0m of transactional
costs (in connection with the acquisition of Syntec) and GBP0.9m of
one-off restructuring costs
-- Balance sheet remains strong following the Syntec acquisition
with net cash of GBP2.8m (FY21: GBP11.7m)
-- Increased final proposed Dividend at 0.67p per share (FY21:
0.61p), demonstrating increasing confidence in the ongoing growth
opportunity
Nik Philpot, Chief Executive Officer, said:
"Eckoh has made significant progress in the last 12 months. We
have shown the resilience of our business model, with growth in
revenue and operating profit and improved quality of earnings with
the completed exit from our Support activity. Our momentum is
underpinned by fast-growing recurring revenues, with an excellent
performance in our US business and a return to growth in the
UK.
We successfully completed the transformational acquisition of
Syntec, which enhanced our position as the largest provider in our
industry. The integration is progressing well and our unified
product suite will extend our market-leading position in Customer
Engagement Security Solutions. Our new multi-platform, cloud
delivery has created differentiation within our industry by
offering greater customer choice, enabling us to deliver our
services efficiently and at scale, and address significantly larger
and global mandates.
We have started the year strongly, and looking ahead the Board
expects FY23 revenue and profits to be significantly higher than
FY22, reflecting our ongoing organic growth, continued momentum in
the US market, a sustained recovery in UK trading, and the
integration of Syntec. In addition, we expect our progress to be
supported by long-term structural growth drivers and increasing
cloud adoption, coupled with the benefits of new products and
operational gearing."
For more information, please contact:
Eckoh plc Tel: 01442 458 300
Nik Philpot, Chief Executive Officer
Chrissie Herbert, Chief Financial Officer
www.eckoh.com
FTI Consulting LLP Tel: 020 3727 1017
Ed Bridges / Jamie Ricketts / Tom Blundell
eckoh@fticonsulting.com
Singer Capital Markets (Nomad & Joint Tel: 020 7496 3000
Broker)
Shaun Dobson / Tom Salvesen / Alex Bond
/ Kailey Aliyar
www.singercm.com
Canaccord Genuity Limited (Joint Broker) Tel: 020 7523 8000
Simon Bridges / Andrew Potts
www.canaccordgenuity.com
About Eckoh plc
Eckoh is a global provider of Customer Engagement Security
Solutions, supporting an international client base from its offices
in the UK and US.
Our Customer Engagement Security Solutions enable enquiries and
transactions to be performed on whatever device the customer
chooses, allowing organisations to increase efficiency, lower
operational costs and provide a true omnichannel experience.
We help our clients to take payments and transact securely with
their customers through all customer engagement channels. The
solutions, which are protected by multiple patents, remove
sensitive personal and payment data from contact centres and IT
environments and are delivered globally through our multiple cloud
platforms or can be deployed on the client's site. They offer
merchants a simple and effective way to reduce the risk of fraud,
secure sensitive data and become compliant with the Payment Card
Industry Data Security Standards ("PCI DSS") and wider data
security regulations. Eckoh has been a PCI DSS Level One Accredited
Service Provider since 2010, securing over GBP5 billion in payments
annually.
Our large portfolio of clients come from a broad range of
vertical markets and includes government departments, telecoms
providers, retailers, utility providers and financial services
organisations.
For more information go to www.eckoh.com or email
MediaResponseUK@eckoh.com .
Introduction
Eckoh has had a successful year consolidating our position as
leaders in the growing Customer Engagement Security market. Our new
metric of Group ARR shows extremely strong progress and we
delivered a robust level of adjusted operating profit, GBP5.2
million, an increase of 10% year on year (FY21: GBP4.7 million) and
ahead of consensus market expectations. We acquired Syntec Holdings
Limited in December 2021 and are pleased with the current
performance. The acquisition, alongside our organic business
growth, will further strengthen our market-leading position. In our
trading and product update in April, we announced the significant
enhancements to our customer engagement security portfolio, the
majority of which are available globally.
Our performance shows the resilience of our model and the merit
of our long-term strategy, given the remaining challenges presented
by the pandemic, the uncertain macro-economic climate and the
planned and completed exit from US and UK Support, which had
contributed GBP2 million to the previous year's profit. As a
result, the Board has increased the proposed dividend by 10% to
0.67 pence per share (FY21: 0.61 pence per share).
Our strong performance reflects ongoing progress in our US
Secure Payments operation, which now accounts for nearly 90% of
total US revenues (FY21: 80% of total US revenues) and with the
enhanced global product offerings provides the platform for
continued growth and additional cross-selling into our existing
clients, a significant part of our strategy. During the year the UK
division has continued to recover and the momentum we saw at the
end of the first half has continued into the second half, with
revenue up 9% year on year in the second half, demonstrating the
resilience of our business model.
A year ago, we said we would introduce an ARR(1) metric, which
we did for the US Secure Payments business in our interim results
in November. At that time, we also committed to include an ARR
metric for the entire Group with our full year results, and we are
pleased to have been able to fulfil that commitment. Given the
transactional nature of some UK revenues, we have slightly updated
our definition of ARR since our trading update in May. Group ARR(1)
was GBP25.1 million as at 31(st) March 2022, a 48% increase
year-year (FY21: GBP17.0 million), a very strong outcome
demonstrating the high level of visibility we have in our business
model.
Total revenue for the year was GBP31.8 million, an increase year
on year of 4% (FY21: GBP30.5 million) or 6% adjusting for constant
exchange rates. Excluding the third-party Support business in FY22
and FY21, revenue was GBP31.2 million, an increase of 11%. Included
within these results are three months of revenue from Syntec, which
is performing in line with our expectations at acquisition.
Gross profit was GBP25.4 million, an increase year on year of 5%
(FY21 GBP24.2 million), with gross profit margin 80%, (FY21: 79%).
US gross profit was GBP8.5 million (FY21: GBP8.9 million), with
gross profit margin increasing as expected to 74% (FY21: 71%). The
growth in gross profit margin in the US, is aligned with our
expectations as US clients successfully renew their contracts, most
new client deployments are on the cloud platform and there is
continued growth in the Secure Payments activity. UK gross profit
was GBP15.6 million (FY21: GBP15.3 million), an increase of 2% with
gross profit margin decreasing by 1% to 84%. Syntec gross profit
was GBP1.4 million, with an 80% gross profit margin, in line with
the Group's gross profit margin.
The prudent cost control we achieved in FY21 has continued into
FY22. We made structural changes to the US Sales team in the second
half of the year and increased our focus on 'vertical selling'
(targeting sectors such as healthcare, which are well suited to our
model). We have introduced a global Network Operations Centre (NOC)
and also streamlined the US operational team, following the planned
and completed exit from the third-party Support business.
Adjusted operating profit(2) was GBP5.2 million (FY21: GBP4.7
million), an increase of 10% year on year. After adjusting for the
planned exit from third-party Support, FY22 adjusted operating
profit was GBP4.8 million, a year-on-year improvement of 81% (FY21:
adjusted operating profit excluding third party Support GBP2.7
million).
Total contracted business(3) for the financial year at the Group
level was GBP22.5 million (FY21: GBP30.7 million), with 77% of all
new business from Secure Payment solutions. The first half of the
year was challenging for new business and particularly large
enterprise contracts with the ongoing impact of the pandemic at the
time. We started to see improvements as the second half started,
but the usually strong final quarter of the year was then impacted
unexpectedly by the global macro-economic challenges arising from
the ongoing conflict in Ukraine. New business won in the year was
GBP10.8 million (FY21: GBP15.7 million), an unsatisfactory outcome,
but with the continued pandemic challenges in the first half and
the macro-economic challenges in the last quarter, it was an
understandable result. We are, however, very encouraged by trading
in the first quarter of the new year, with order levels already
significantly higher than last year, and with a much stronger
pipeline.
Our balance sheet remains robust with a strong net cash position
of GBP2.8 million (FY21: GBP11.7 million). In the first half of the
financial year, we repaid the final instalment of the term loan
with Barclays Bank and in December we utilised some of our cash
reserves to part-fund the acquisition of Syntec. In addition, and
as a result of the acquisition of Syntec, the Group entered into
new banking arrangements with Barclays Bank for a GBP5.0 million
Revolving Credit Facility (RCF) and a GBP5.0 million overdraft
facility. As at 31(st) March there was no debt drawn under either
facility. The RCF is secured against the Group's UK head office
which is an asset we own outright.
A clear growth strategy
Our strategic objectives reflect our primary goal to become the
global leader in our areas of expertise, and in particular,
Customer Engagement data and payment security.
Our strategic objectives include:
-- Being the market leader for Customer Engagement data and payment security
-- Capitalise on the fast-growing global market for technology
solutions that help protect customer data
-- Maximise client value and retention through cross-selling to
generate higher levels of recurring income
-- Make cloud our primary platform and use cloud technologies to
develop and enhance our proprietary solutions
-- Evaluate acquisition opportunities that can support our
growth strategy in Customer Engagement security
Highly complementary products brought together into a new
enhanced security-led proposition
Historically Eckoh's go-to-market proposition encompassed two
highly complementary areas: Secure Payment products and Customer
Engagement solutions.
-- The Group's patented Secure Payment products help
organisations to reduce the risk of fraud; secure sensitive data;
comply with the Payment Card Industry Data Security Standard ("PCI
DSS") and wider security regulations such as the General Data
Protection Regulation ("GDPR") or the US Consumer Privacy Acts.
Eckoh prevents sensitive personal and payment data from entering IT
and contact centre environments when customers make payments for
goods and services.
-- The Group's Customer Engagement Solutions help organisations
transform the way they engage with their customers. Eckoh's
proposition, enables enquiries and transactions to be performed on
whatever device the customer chooses, through any inbound
communication channel and allows customers to self-serve or to
engage with a customer service advisor. It enables our clients to
increase efficiency, lower operational costs and increase customer
satisfaction by providing a true Omnichannel experience.
The overlap between these two areas has always been significant
and has led us to update and unify our proposition into a new
go-to-market vision of Customer Engagement Security Solutions.
Going forward all of our customer engagement offerings will be
underpinned with security features and capabilities to assist our
clients to address security concerns and increasing regulation, but
to do so in a way that doesn't compromise the quality of their
customer's experience. An example of this is our live chat offering
which incorporates our patented and unique ChatGuard capability,
that enables payment or personal information to be entered by a
customer into a live chat session without any of that information
traversing our client's environment or being shared with an
advisor.
In the past our UK operations sold our entire product portfolio,
but in the US - a territory that Eckoh entered six years ago - the
focus has been on Secure Payments, where we had the greatest
differentiation and the least competition. Going forward this
distinction will no longer be the case, with our new product
proposition being available to any client in any territory. Our
solutions, which will enable our clients to 'Engage, Secure and
Protect' their customers, will all be delivered through our
multi-vendor and global cloud platforms, allowing us to better
service international contracts. The procurement of security and
payment solutions to be deployed across multiple territories is
certainly increasing, and we will continue to invest in and extend
our cloud platforms to support this growth. This trend will broaden
our market further and inevitably lead to us having a blurring of
our geographical target markets with Rest of World ('ROW') becoming
a more important component of our future revenue streams.
The growing proportion of cloud deployments we have already seen
occur in the US market, alongside the acquisition of Syntec, means
our ability to sell and deliver additional services to clients is
very much enhanced. With our product roadmap extending our security
remit beyond payments and into a broader data security proposition
we expect to be able to increase the lifetime value of our clients
and continue to have very low levels of churn.
As part of the integration of Syntec we have formed a
cross-company technical group who are working on the unification of
the security product proposition, a project that we have named
'Syntegration'. This will lead us to have the ability to deliver
all our Customer Engagement Security Solutions from a combined
cloud native code base and have the flexibility of seamlessly
adding new functionality or additional services as desired by the
client, reducing the time to revenue considerably. The first
instantiation of this new unified offering is expected to be
available in this calendar year.
New growth drivers in a broadening global market
Our target market in the UK and US for our Secure Payments
proposition has historically been any sizeable enterprise or
organisation that either transacts or engages with its customers at
scale and at volume. This activity will usually be supported either
by an in-house or outsourced contact centre provider. The greater
the volume of payment transactions or customer engagement activity
that the organisation has, the more attractive they are to Eckoh,
and the larger the contact centre operation supporting the
organisation is likely to be.
However, with the advent of a unified go-to-market proposition
of Customer Engagement Security Solutions, enhanced by the new
products and delivered through our expanding cloud platforms, not
only will this naturally extend our reach geographically but it
will also increase the opportunity within every client account.
With regulation tightening and the financial impact of data
breaches and fraud growing, organisations are increasingly looking
for ways to move beyond the requirement of merely being compliant
to secure themselves more comprehensively, leading to broadening
information security budgets and remits.
The contact centre industry in both the UK and US is extremely
large, representing around 4% of the entire workforce in both
markets. However, the pandemic and the current economic climate is
fundamentally changing the way that the contact centre industry
operates and the pressures it has to deal with.
-- The pandemic has forced contact centres to adopt hybrid
working, increasing security concerns
-- Recruitment and churn are huge problems, making it very
challenging to properly service clients' needs
-- The cost-of-living crisis will accelerate levels of fraud and
increase collection issues
In the aftermath of the pandemic there is now a much greater
reliance on contact centre agents working remotely, usually from
their homes, and that is only going to accentuate security concerns
and requirements. The trend of remote working for managing customer
engagement is almost certainly a permanent feature, and t his can
only benefit Eckoh as our security proposition enables companies to
effectively further reduce or remove the risk of data breaches
arising from one of the most challenging parts of their
businesses.
Furthermore, the contact centre industry is now battling with a
huge problem of churn and recruitment challenges as a consequence
of the realignment of employees' career aspirations coming out of
the pandemic. This is unlikely to be solved easily or quickly and
organisations will be looking even more acutely at the utilisation
of their human agents and turning increasingly to technology to
maximise first contact resolution levels and the average handling
time for each contact. Eckoh's new product portfolio will ensure
that customers can be dealt with swiftly and effectively, without
compromising their customer experience or the security of their
data.
Lastly, the cost-of-living crisis will inevitably lead to an
increase in fraud, both from internal employees and external
organised criminals. Contact centres are a relatively low paid
sector and it is this tier of employees who arguably will be most
badly hit by the economic pressures, which may lead to a greater
propensity for them to commit criminal acts, whether independently
or on behalf of organised crime. The same economic challenges will
also lead to greater numbers of consumers becoming either unwilling
or unable to pay off charges for services. Managing those customers
and trying to successfully and sensitively collect their payments
will require more innovative and effective use of technology, and
Eckoh's security proposition has proven success and a demonstrable
return on investment in this area.
Operational review
US Division (39% of group revenues)
The US business, including the Syntec US activity, represented
39% of Group revenues in 2022 (FY21: 41%). In the US, the Group's
focus has remained on the US Secure Payments opportunity, where we
deliver a patented solution through the Eckoh CallGuard brand or
Syntec CardEasy brand. The product enables enterprises to take card
payments securely within their contact centre operations and the
growth opportunity is underpinned by long-term structural drivers
of tightening regulation, the need to mitigate the risk of data
breaches (and fraud) within our clients' IT and contact centre
operations and the migration to a greater level of remote
working.
As the more extensive Customer Engagement Security offering
delivered through our global cloud platforms is introduced to the
US this year, there is a huge opportunity to cross-sell to our
existing enterprise clients, many of which are the largest brands
in the US market. This approach has proven to be highly successful
with our UK clients and will drive continued growth.
In the US, Secure Payment revenue was $13.8 million an increase
of 8.1% (FY21 $12.8 million) and 88% of total US revenue (FY21:
78%). The revenue growth has been tempered in this period by the
three secure payment contracts that successfully renewed for the
first time during the year, one of which was our largest contract
to date, a $7.4 million 2-year contract that went live in 2019. At
the point of renewal, the hardware fees and implementation fees are
fully recognised and as we see more clients go through their first
renewal, we will see the overall percentage of recurring revenue
continue to increase. This is illustrated by the progress in
recurring revenue, which was 65% (FY21: 52%), an improvement of
13%, demonstrating both the successful renewals achieved in the
year and the increased number of clients who deploy on our global
cloud platform. We expect the level of cloud deployments to
continue at the current level, which will continue to improve the
recurring revenue and the gross profit of the business.
The planned transition to Secure Payments and ultimate exit from
the Support activity is now completed, with only $0.5m of revenue
in this financial year coming from Support. Over the last five
years Secure Payments has grown at a compound annual growth rate of
30% and the quality of earnings going forward will be enhanced by
the exit from the shorter-term Support contracts. The growth of the
US business is further demonstrated in the new ARR metric. The
Eckoh US Secure payments ARR is $9.0m, an increase of 38% from the
same time last year. When the Syntec US activity is included, the
combined ARR is $11.9 million, an increase year on year of 82%.
Total contracted business was $10.6 million a decrease of 35%
(FY21 $15.5 million). The level of new contracts was lower in the
second half than expected, reflecting an unusually quiet fourth
quarter due to macro-economic conditions and ramifications of the
Ukraine situation. The Company remains focused on large enterprise
contracts, and whilst deals were slow to close at the end of the
year, the pipeline is stronger than a year ago and encouragingly we
have seen much higher levels of activity and value of deals closing
in Q1 of the new year compared to last.
We continue to see, as expected, the general acceleration
towards cloud deployments and with our recently announced
implementation of a new Microsoft Azure Cloud platform with a
Fortune 100 US retailer now live, this makes Eckoh the only
provider in our industry to offer alternative cloud providers. This
particular client actively chose to deploy onto the Azure platform,
illustrating that there are sensitivities and preferences that
clients will have that will influence their choice of Cloud
provider.
The ability to offer our clients a choice of cloud platform
strengthens our position in the market and the expansion globally
of our cloud platforms and capabilities remains one of our key
strategic goals. One of the big advantages this brings is the speed
and ease with which multiple parts of our secure engagement
portfolio can be deployed. The client who is now live on our Azure
platform has entered into two separate contracts with us. The first
worth $1.4m over three years is for securing their voice agents,
the second worth $0.6m is to allow them to securely take digital
payments across other engagement channels, notably live chat. This
is a good illustration of how we expect new and existing clients to
take multiple parts of our portfolio and extend the reach of their
overall solution over time.
While cloud deployment remains a key goal and advantage, we
still expect that many of the largest enterprises will take many
years to achieve that objective, so retaining the capability to
deploy as required in a client's own data centres and environment
continues to give us a tactical advantage over our competitors.
The launch of CallGuard Express in the second half, which is
deliberately designed for smaller customers, will see smaller
contracts being targeted and won for the first time. This product
is extremely quick to deploy, with very limited operational
overhead associated with it, so the conversion of a sale into
revenue will be much faster than on our larger contacts, and the
margin higher. We expect these contracts to be primarily won
through partners and our sales channels continue to strengthen, so
the share of pipeline and revenue from partners is expected to
increase over time. Partner sales opportunities now represent 30%
of our total pipeline.
The average length of new contracts for Secure Payments is three
years which is comparable to the UK, however, it is more typical in
the US for renewals to be annual, often on an auto-renew. During
the year there were five contracts that successfully renewed, one
of which was our largest contract signed to date ($7.4 million over
2 years). There was a significant level of one-off fees in this
contract, which were fully recognised in the first half. In the
second half of the year there were two contracts, which are both on
an annual auto-renew as described above, they are now in their
fourth and fifth year showing similar lifecycle values to our UK
clients.
External factors, such as the impending change to version 4 of
the Payment Card Industry Data Security Standard (PCI DSS), the
implementation of new data laws such as US Consumer Privacy Acts
and significant fines levied on US organisations through the GDPR
legislation, are undoubtedly helping raise awareness of the risks
of not protecting sensitive data properly. This will assist us in
continuing to build our pipeline which is substantial and growing.
Our focus on these larger contracts means that in future periods
the timing of contract wins continues to be hard to predict given
the typically longer sales cycle.
In the year Coral and Support had a combined revenue of $1.8
million (FY21: $3.5 million) and accounted for 12% of the revenues
(FY21:22%). A proportion of the restructuring costs incurred in the
US in the first half relate to the third-party Support area of the
business and the last stage of the restructuring took place in
October as we merged the UK and US Customer Support desks to a
global Network Operations Centre (NOC).
Coral is a browser-based agent desktop that increases efficiency
by bringing all the contact centre agent's communication tools into
a single screen. It also enables organisations, particularly those
who have grown by acquisition, to standardise their contact centre
facilities, as Coral can be implemented in environments that
operate on entirely different underlying technology. In the prior
period, we secured additional licences and functionality of $1.0
million in the year. In FY22, there were no incremental licence
fees, however as we have indicated previously, the timing of Coral
orders remains hard to forecast and they will be lumpy in
nature.
This will be the last time that the US is reviewed in the
context of Secure Payments only. With the shift to a unified
Customer Engagement Security Solutions proposition we will be
commenting on our progress across this broader offering and will be
able to assess progress in our ability to cross-sell new services
into existing clients as well as on boarding new clients.
UK Division, including Syntec UK and Rest of World (61% of group
revenues)
During the year the UK division has continued to recover and the
momentum we saw at the end of the first half has continued into the
second half, with revenue up 9% year on year in the second half,
demonstrating the resilience of our business model. This provides
us with continued confidence for the new year coupled with the
strong contracted business already achieved in the first quarter to
date.
Revenue in the year was GBP18.6 million (FY21 GBP18.0 million)
an increase of 3%, this is particularly pleasing given the
challenging beginning to the year, when the country remained
impacted by the pandemic. When the third-party Support revenue is
excluded in FY22 and FY21, the underlying growth was 9% from
GBP16.8 million to GBP18.3 million. Recurring revenue has decreased
to 80% from 84% in FY21 partly due to the planned exit from
third-party Support.
UK clients are contracted through a range of commercial models
that have evolved over time, unlike the newer US business
(including Syntec US activity), which operates entirely on fixed
fee contracts. Where the commercial model is transactional, which
is common, it is usual for a client to commit to a high percentage
of its expected volumes and in so doing achieve the most
competitive buying rate. The portion of a client's revenue that is
not committed is generally repeatable, even as we saw in the
pandemic, where the UK activity levels were very significantly
impacted but the revenue impact was only around 10%. In introducing
the Group ARR metric, we have had to make an assumption on the
revenue that is not contractually committed but is, and has been,
repeatable. Based on this view UK ARR at the end of the period was
GBP16.5m, a 36% increase including Syntec, 8% of which was
organic.
Gross profit in the year was GBP15.6 million, an increase of 2%
(FY21: GBP15.3 million) and gross margin in the UK decreased in the
period by 1% to 84% (FY21: 85%).
Total contracted business was GBP13.3 million compared to
GBP18.9 million in the prior year and new contracted business was
GBP5.0 million compared to GBP5.9 million, a 14% decrease year on
year. Total contracted business can be impacted by the timing of
particularly large renewals, for example, in FY21 we completed a
six-year contract renewal with Capita for the provision of services
for the Congestion Charge to Transport for London, at a minimum
contract value of GBP4 million. In FY22 we completed important
renewals with amongst others Premier Inn, Rail Delivery Group,
Thames Water and Boots, but these were comparatively smaller than
the Capita agreement. There was only one significant client that
was not renewed in the period, who were contracted through a
partner, and migrated to a different solution, this was the first
such non-renewal for many years. Since the financial year end, we
have successfully renewed our largest contract scheduled for this
financial year, a contract through Capita for a large public
service organisation, which was GBP2.1 million over the term.
Looking at the segmentation of UK revenue, 28% came from Secure
Payment services (FY21: 27%), 32% from Customer Engagement
Solutions (FY21: 36%) and the remaining 40% from clients where we
provide a combination of both solutions (FY21: 37%). The shift from
Customer Engagement Solutions to clients with combined solutions is
principally due to the improving volumes from our larger clients
who take both the Secure Payments solution and the Customer
Engagement Solution.
Our model of cross-selling to existing clients remains a key
part of the Eckoh strategy, not just to generate incremental
revenue but also to continue the trend of strong client retention
and to further increase the lifetime value of the Group's
customers. GBP3.6 million of the new business secured in the year
(FY21: GBP3.5 million) was contracted with existing customers for
delivery of new solutions or modifications. Our strong track record
with existing clients has also continued to be demonstrated through
the extremely high proportion of clients that are successfully
renewed.
New business wins, consistent renewals of existing clients and
the improved transactional volume from our long-standing clients
give us high revenue visibility and our UK clients are underpinned
by contractual fees or minimum transaction levels. We expect the
improvement in transactional revenues seen in the second quarter to
continue into the second half, subject to no further lockdowns
being implemented.
Syntec contributed GBP1.7 million of revenue and GBP0.3 million
of operating profit in the final quarter of the financial year.
This was consistent with our expectations at the time of the
transaction, and the integration of the businesses is proceeding on
plan. Unification of the technology and product offering is making
progress and we expect to deliver a unified and enhanced
go-to-market proposition in 2022.
Product update
In April we announced significant enhancements to our Customer
Engagement Security portfolio to assist organisations in protecting
their customers' payment and personal data in more efficient and
diverse ways.
The enhancements support Eckoh's strategic goals to capitalise
on the structural developments in the global market and to use
cloud technologies to develop and enhance our proprietary solutions
while maintaining a market leading position for Customer Engagement
data and payment security. These new enhancements included:
Secure Chat
Eckoh's Live Chat product is used by large enterprises that need
the most versatile customisations and integrations plus the ability
to scale to support the largest and most demanding requirements -
something that off-the-shelf Chat products cannot provide. With a
new redesigned interface based on extensive client feedback, agents
and customers can now enjoy an even slicker and more convenient
experience that is fully cloud-hosted, allowing for sudden and
significant fluctuations in demand. With Eckoh's unique and
patented product ChatGuard built-in as standard, organisations can
take fast in-chat payments with the reassurance of full PCI DSS
compliance. Eckoh's Secure Chat is the only service to offer this
capability and this updated version is now available globally and
is expected to add significant value to the security
proposition.
Digital Payments
Blending digital security with live person interaction, Eckoh's
Digital Payments can be extended to any customer engagement
channel. Organisations can now provide their customers with a
secure payment link triggered by the agent from an engagement on a
chat or messaging session or via an email. The agent can monitor
the progress of the payment process in a similar way to our voice
security product, and without any exposure to any of the data. It
also offers the consumer traditional card payment or popular
alternative payment methods like PayPal, ApplePay or GooglePay.
Digital Payments is now available globally through Eckoh's
multi-cloud platforms, the latest addition to the broadening
security product range that is facilitating greater opportunities
for cross-selling into Eckoh's extensive client base.
CallGuard Express
CallGuard Express is designed to make compliance and security
straightforward for any business. It offers companies of any size
the same security functionality and credentials of CallGuard, but
without the customisation and managed service that larger companies
often require. This enables CallGuard Express to be quick to
deploy, simple to use and with a lower-cost entry point. As well as
standalone businesses, this new proposition is also available to
resellers through a partner program, enabling them to switch on new
clients within days with no integration required.
CallGuard On-Demand
In response to the increasingly rigorous Payment Card Industry
Data Security Standards ("PCI DSS"), Eckoh has developed an
on-demand option for organisations who may have low or variable
volumes of payments but still require the reassurance of full
compliance. This enhancement gives the contact centre agent the
ability to invoke CallGuard only when a payment is taken, rather
than all calls needing to traverse through the system.
Speech technology expansion
Eckoh has a long and successful history of speech-based
applications and is leveraging that knowledge by enabling even more
languages for the speech option in our security solutions. A new
five-year contract, which was a significant cross-sell into a
Syntec account, will see 18 different languages being implemented
across the global estate of an international travel business.
Amazon Connect
During FY22 we have invested in progressing the delivery of
Eckoh solutions that include Amazon Connect as the Cloud telephony
layer. When combined with Eckoh's Customer Engagement Security
Solutions this creates a compelling bundled solution that will
enable Eckoh clients to have complex and feature-rich cloud
customer engagement but delivered in a truly flexible, agile and,
most importantly, secure way.
Syntegration - Creating a new cloud delivered Customer
Engagement Security offering
'Syntegration' is an in-flight project to bring the best of
Eckoh and Syntec's existing products and technologies together, and
build a unified platform and roadmap for future new capability.
Both company's core development teams have been working as one
cohesive unit to take all the best elements of each product and
bring them together into a truly world-class product suite. It will
provide a seamless upgrade path for current clients to benefit from
all the same capabilities as future clients.
Both Eckoh and Syntec already had well-established, successful
products in the market, having benefitted from many man-years of
initial development coupled with subsequent enhancements and fine
tuning based on feedback from some of the world's largest brands.
The combination of the two products not only enhances the core
security aspects of the platform, but also extends capability to
new features almost immediately and creates an extensive roadmap
for future innovation.
With each solution having its own unique strengths, Eckoh has
capitalised on these, bringing them together in a re-worked code
base, plugging in additional capabilities and deployment models,
and leveraging advances in Cloud technology that have emerged in
the last five years. As Eckoh's CallGuard and CardEasy brands will
now both benefit from the cross-pollination of features, many
near-term roadmap items will be brought to fruition via this
'Syntegration' rather than net-new development. Further, our
long-term roadmaps now culminate into a single vision where new
features can be developed and released on an accelerated timeline
with the larger and more integrated research and development
team.
The benefits of Syntegration are wide ranging, not only
strengthening Eckoh's product proposition and partner integrations,
but also delivering a significant number of operational
efficiencies and reduced cost of
ownership. Some key benefits of the new offering will be:
-- Best of both product sets
-- Cloud agnostic
-- Increases automation and agent efficiency
-- Seamless upgrade path for all customers
-- Reduces the total cost of ownership by lowering the cloud footprint (less computing power)
-- Brings together an unrivalled stable of out-the-box integrations
-- Fits any deployment model we have encountered
-- Delivery through configuration rather than bespoke development
-- Provides the backbone for our Customer Engagement Security roadmap
-- Combines architectural and engineering expertise with a growing patent portfolio
Outlook
The balance sheet remains strong with net cash of GBP2.8m (FY21:
GBP11.7m), well ahead of expectations. The reduction from last year
reflects the completed acquisition of Syntec in December 2021,
which was part funded from our cash reserves.
The Board expects revenue and profit for FY23 to be
significantly higher than FY22. This will be driven by synergistic
benefits of the Syntec integration, ongoing momentum in the US
market, and expected normal trading activity in the UK; supported
by long-term structural growth drivers and cloud adoption. The
Board is confident of further progress in the year ahead, with an
encouraging pipeline, a model with high recurring revenues and a
robust balance sheet , coupled with the benefits of new products
and operational efficiencies. These expectations are subject to
ongoing uncertainty in the macro-economic climate.
Financial Review
Eckoh has had a successful year and delivered a robust level of
adjusted operating profit, GBP5.2 million, an increase of 10% year
on year (FY21: GBP4.7 million) and ahead of consensus market
expectations. We acquired Syntec Holdings Limited in December 2021
and their results for the three months to 31(st) March 2022 are
included in the below review.
Revenue for the year increased by 4% to GBP31.8 million (FY21:
GBP30.5 million) and at constant exchange(3) rates by 6%. Adjusted
operating profit(1) was GBP5.2 million an increase of 10% year on
year (FY21: GBP4.7 million). Profit after tax for the year was
GBP1.6 million, compared to GBP2.8 million in FY21. In the current
year profit after tax of GBP1.6 million, there are GBP1.0 million
of transaction costs relating to the acquisition of Syntec and
restructuring costs of GBP0.9 million. The restructuring costs
include redundancy and contract termination costs following the
acquisition of Syntec and redundancy costs in Eckoh US following
the restructuring of the Sales team, the introduction of a global
Network Operations Centre (NOC) and the completion of the exit of
the third-party Support business.
Basic earnings per share for the year ended 31 March 2022 was
0.59 pence per share (FY21: 1.09 pence per share). Adjusted
earnings per share for the year ended 31 March 2022 was 1.57 pence
per share (FY21: 1.49 pence per share).
Divisional performance
Revenue in the UK, which represents 59% (FY21: 59%) of total
group revenues, increased by 3.1% to GBP18.6 million (FY21:
GBP18.0m). The US represented 36% (FY21: 41%) of total group
revenues and revenues decreased in the period by 7.7% to GBP11.5
million (FY21: GBP12.4m). After excluding the exited third-party
Support business in prior years, revenues increased by 4.9%. Syntec
revenue was GBP1.7 million, or 5% of total group revenues, in line
with expectation at acquisition. Revenues in local currency grew by
5.7% year on year.
Following the acquisition of Syntec, whose business is split
across the US, UK and Rest of World (ROW), the increasing frequency
of contracting on a global basis with clients and the increased
global deployment of our products as we increase our product
availability globally through our multi-cloud offering, we will
review the most appropriate and meaningful approach to measure the
success of our business. Including the Syntec US revenues with
Eckoh's US division, means US revenues account for 39% of revenues,
the UK and ROW 61%.
Further explanations of movements in revenue between the US and
UK divisions, including Syntec have been addressed in the
Operational Review above.
FY22 FY22 FY22 FY22 FY21 FY21 FY21
(UK) (US) (Syntec) Total (UK) (US) Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- --------- --------- ----------- --------- -------- -------- --------
Revenue 18,596 11,487 1,697 31,780 18,037 12,449 30,486
Gross Profit 15,593 8,473 1,357 25,423 15,299 8,896 24,195
Gross margin 84% 74% 80% 80% 85% 71% 79%
-------------- --------- --------- ----------- --------- -------- -------- --------
Gross profit
The Group's gross profit increased to GBP25.4 million (FY21:
GBP24.2 million). Gross profit margin was 80% for the year, an
increase of 1% year on year (FY21: 79%). The UK gross profit margin
decreased by 1% to 84%. In the US, the full year margin increased
from 71% to 74% as previously indicated, due to the continued
increase in Secure Payments and particularly in the cloud
environment, the planned transition away from the third-party
Support business and the impact of one-off Coral licences in the
prior year.
In the UK, as the service is hosted on an Eckoh platform, there
is typically no hardware provided to clients and the gross profit
margin is expected to remain at 84-85%. In the US, we would expect
the gross profit margin to continue to increase from 74% to approx.
76% over the next two years. This is driven by the continued growth
of the Secure Payments' activities for cloud solutions coupled with
clients renewing their contracts without additional significant
hardware. Syntec has a mixture of business delivered in the US, UK
and ROW, with deployments typically through its hosted cloud
platform for its UK and ROW business, with the US business having a
mixture of on-site deployments and more lately cloud deployments,
the gross profit margin is expected to remain at approx. 80%.
Administrative expenses
Total administrative expenses for the year were GBP23.0 million
(FY21: GBP20.6 million). Adjusted administrative expenses(4) for
the year were GBP20.2 million (FY21: GBP19.4 million). The prudent
cost control achieved in FY21 has continued into FY22, we made
structural changes to the US Sales team at the end of the first
half and increased our focus on 'vertical selling' (targeting
sectors such as healthcare, which are well suited to our model), we
have introduced a global Network Operations Centre (NOC) and also
streamlined the US operational team, following the planned and
completed exit from the third-party Support business. Included in
administrative expenses is a trading foreign currency loss of
GBP0.1 million (FY21: GBP0.4million loss).
Profitability measures
Adjusted operating profit was GBP5.2 million, an increase of
10.1% year on year (FY21: GBP4.7 million). Included in the year was
a foreign currency loss of GBP0.1 million (FY21: loss GBP0.4
million) and nil Coral licences (FY21 GBP0.3 million). Adjusted
EBITDA(2) for the year was GBP6.8 million, an increase of 7.6% year
on year (FY21: GBP6.4 million).
Year Year
ended ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------------------------- ---------- ----------
Profit from operating activities 2,386 3,550
Amortisation of acquired intangible
assets 751 663
Expenses relating to share option schemes 241 536
Restructuring costs 866 -
Costs relating to business combinations 985 -
Adjusted operating profit(1) 5,229 4,749
---------- ----------
Amortisation of other intangible assets 392 398
Depreciation of owned assets 675 704
Depreciation of leased asset 498 505
------------------------------------------- ---------- ----------
Adjusted EBITDA(2) 6,794 6,356
------------------------------------------- ---------- ----------
1. Adjusted operating profit is the operating profit before
adjustments for expenses relating to share option schemes,
amortisation of acquired intangibles assets, restructuring costs
and costs relating to business combinations.
2. Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) is the profit from operating activities
adjusted for depreciation, amortisation, expenses relating to share
option schemes, restructuring costs and costs relating to business
combinations.
3. At constant exchange rates (using last year exchange
rates)
4. Adjusted administrative expenses are administrative expenses
before adjustments for expenses relating to share option schemes,
depreciation of owned and leased assets, amortisation of acquired
intangible assets, restructuring costs and costs relating to
business combinations
Statement of financial position
While Eckoh continues to innovate by developing new products and
features such as those detailed in the product update, little of
this is capitalised on the balance sheet with only GBP0.3 million
(FY21: GBP0.4m) added in the year to the value of the intangible
assets of the Company. While taking a prudent approach to
capitalising salary cost, which reduces reported profit, management
believes this approach gives an accurate reflection of the trading
performance of the Company.
Finance charges
For the financial year ended 31 March 2022, the interest payable
charge was GBP74k (FY21: GBP87k). The interest charge is made up of
bank interest of GBP23k (FY21: GBP54k) and interest on leased
assets of GBP51k (FY21: GBP33k).
Taxation
For the financial year ended 31 March 2022, there was a tax
charge of GBP743k (FY21: GBP717k charge). The effective tax rate in
the financial year ended 31 March 2022 was 43.8% (FY21: 20.4%). The
current year tax rate is impacted by the non-deductible nature of
the fees relating to the transaction of Syntec and the reversal of
deferred tax on the share options for the Exec Directors which are
unlikely to vest in July 2022.
Earnings per share
Basic earnings per share was 0.59 pence per share (FY21: 1.09
pence per share). Diluted earnings per share was 0.51 pence per
share (FY21: 1.06 pence per share). Adjusted diluted earnings per
share was 1.34 pence per share (FY21: 1.45 pence per share).
Client contracts
Client contracts are typically multi-year in length and have a
high proportion of recurring revenues, usually underpinned by
minimum commitments. With a greater proportion of contracts being
delivered through the cloud the initial set up fees and hardware
costs associated with larger customer premise deployments will be
reducing, leading over time to an increase in operating margin.
Contract liabilities and contract assets
Contract liabilities and contract assets relating to IFRS 15
Revenue from Contracts with Customers have decreased in the current
year, principally as new contracted business in the US has been
predominantly for cloud-based solutions. Where clients contract for
their services to be provided in the cloud or on our internal cloud
platform, the level of hardware is significantly reduced and
implementation fees are typically lower. This reduces the level of
upfront cash received but drives a greater level of revenue
visibility and earnings quality. Total contract liabilities were
GBP12.5 million (FY21: GBP11.3 million), included in this balance
are GBP9.5 million of contract liabilities relating to the Secure
Payments' product, hosted platform product or Syntec's CardEasy
Secure Payments product, a decrease from GBP1.8 million at the same
time in the previous year. Contract assets as at 31 March 2022 were
GBP3.8 million (FY21: GBP4.4 million).
Cashflow and liquidity
Gross cash at 31 March 2022 was GBP2.8 million (FY21: GBP12.7
million), as at 31 March 2022 there was no drawdown of debt (FY21:
GBP1.0 million debt). In April and July 2021, the Company made the
two final quarterly repayments of GBP1.0 million of the loans
outstanding to Barclays Bank in accordance with the terms of the
term loan. During the second half of the year and as a result of
the acquisition of Syntec, we utilised our cash reserves to
part-fund the acquisition, raised funds from Shareholders and the
Group secured a new GBP10 million debt facility with Barclays Bank,
which comprises a GBP5.0 million overdraft and a GBP5.0 million
revolving credit facility. During the year, there has been a net
cash outflow from working capital of GBP1.7 million (FY21: GBP2.3
million cash outflow) due to the timing of invoicing and cash
receipts and as the deferred revenue for the US large on-site
deployments has been recognised over the term of the contract,
generally three years.
Dividends
Post year end the Directors are recommending that a final
dividend for the year ended 31 March 2022 of 0.67 pence per
ordinary share be paid to the Shareholders whose names appear on
the register at the close of business on 23 September 2022, with
payment on 21 October 2022. The ex-dividend date will be 22
September 2022. This recommendation will be put to the Shareholders
at the Annual General Meeting. Based on the shares in issue at the
year end, this payment would amount to GBP2.0m.
Consolidated statement of total comprehensive income
for the year ended 31 March 2022
2022 2021
Notes GBP'000 GBP'000
---------------------------------------------- ------ --------- ---------
Continuing operations
Revenue 2 31,780 30,486
Cost of sales (6,357) (6,291)
---------------------------------------------- ------ --------- ---------
Gross profit 25,423 24,195
Administrative expenses (23,037) (20,645)
---------------------------------------------- ------ --------- ---------
Operating profit 2,386 3,550
---------------------------------------------- ------ --------- ---------
Adjusted operating profit 5,229 4,749
Amortisation of acquired intangible
assets (751) (663)
Expenses relating to share option schemes (241) (536)
Exceptional restructuring costs (866) -
Costs relating to acquisition 5 (985) -
---------------------------------------------- ------ --------- ---------
Profit from operating activities 2,386 3,550
---------------------------------------------- ------ --------- ---------
Finance charges (74) (87)
Finance income 6 48
Profit before taxation 2,318 3,511
Taxation (743) (717)
---------------------------------------------- ------ --------- ---------
Profit for the financial year 1,575 2,794
============================================== ====== ========= =========
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss:
Foreign currency translation differences
- foreign operations 139 134
---------------------------------------------- ------ --------- ---------
Other comprehensive income for the
year, net of income tax 139 134
---------------------------------------------- ------ --------- ---------
Total comprehensive income for the
year attributable to the equity holders
of the parent company 1,714 2,928
============================================== ====== ========= =========
2022 2021
---------------------------------------------- ------ --------- ---------
Profit per share pence Pence
---------------------------------------------- ------ --------- ---------
Basic earnings per 0.25p share 3 0.59 1.09
Diluted earnings per 0.25p share 3 0.51 1.06
Consolidated statement of financial position
as at 31 March 2022
2022 2021
Notes GBP'000 GBP'000
---------------------------------- ------- --------- ---------
Assets
Non-current assets
Intangible assets 39,664 6,527
Property, plant and equipment 4,189 4,307
Right-of-use leased assets 1,516 1,310
Deferred tax assets 1,789 3,211
-------------------------------------------- --------- ---------
47,158 15,355
------------------------------------------ --------- ---------
Current assets
Inventories 268 174
Trade and other receivables 12,283 13,277
Cash and cash equivalents 2,840 12,706
-------------------------------------------- --------- ---------
15,391 26,157
------------------------------------------ --------- ---------
Total assets 62,549 41,512
Liabilities
Current liabilities
Trade and other payables (18,286) (18,482)
Other interest-bearing loans and
borrowings - (975)
Lease liabilities (609) (517)
-------------------------------------------- --------- ---------
(18,895) (19,974)
------------------------------------------ --------- ---------
Non-current liabilities
Lease liabilities (928) (825)
Deferred tax liabilities (2,983) (296)
-------------------------------------------- --------- ---------
(3,911) (1,121)
------------------------------------------ --------- ---------
Net assets 39,743 20,417
-------------------------------------------- --------- ---------
Shareholders' equity
Called up share capital 732 638
Share premium account 22,180 2,663
Capital redemption reserve 198 198
Merger reserve 2,697 2,697
Currency reserve 1,121 982
Retained earnings 12,815 13,239
-------------------------------------------- --------- ---------
Total shareholders' equity 39,743 20,417
-------------------------------------------- --------- ---------
Consolidated statement of changes in equity
for the year ended 31 March 2022
Called
up Share Capital Total
share premium redemption Merger Currency Retained shareholders'
capital account reserve reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2021 638 2,663 198 2,697 982 13,239 20,417
Total comprehensive income
for the year
Profit for the financial year - - - - - 1,575 1,575
Other comprehensive expense
for the period - - - - 139 - 139
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Total comprehensive income
for the year - - - - 139 1,575 1,714
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Dividends paid in the year - - - - - (1,559) (1,559)
Shares transacted through
Employee Benefit Trust - - - - - (75) (75)
Purchase of own shares - - - - - (126) (126)
Shares purchased for share
ownership plan - - - - - (111) (111)
Shares issued under the share
option schemes 3 226 - - - - 229
Share based payment charge - - - - - 464 464
Shares issued as part of
acquisition 91 19,291 - - - - 19,382
Deferred tax on share options - - - - - (592) (592)
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Transactions with owners
recorded directly in equity 94 19,517 - - - (1,999) 17,612
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Balance at 31 March 2022 732 22,180 198 2,697 1,121 12,815 39,743
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Called
up Capital Total
share Share redemption Merger Currency Retained shareholders'
capital premium reserve Reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Balance at 1 April 2020 638 2,663 198 2,697 848 11,965 19,009
Total comprehensive income
for the year
Profit for the financial year - - - - - 2,794 2,794
Other comprehensive expense
for the year - - - - 134 - 134
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Total comprehensive income
for the year - - - - 134 2,794 2,928
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Dividends paid in the year - - - - - (1,558) (1,558)
Shares transacted through
Employee Benefit Trust - - - - - (138) (138)
Shares purchased for share
ownership plan - - - - - (241) (241)
Share based payment charge - - - - - 303 303
Deferred tax on share options - - - - - 114 114
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Transactions with owners
recorded directly in equity - - - - - (1,520) (1,520)
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Balance at 31 March 2021 638 2,663 198 2,697 982 13,239 20,417
------------------------------- --------- --------- ------------ --------- --------- ---------- ---------------
Consolidated statement of cash flows
for the year ended 31 March 2022
2022 2021
Notes GBP'000 GBP'000
--------------------------------------- ------ --------- --------
Cash flows from operating activities
Cash generated from operations 4 3,362 4,385
Taxation received/ (paid) 88 (10)
Interest paid (23) (54)
Interest paid on lease liability (51) (33)
--------------------------------------- ------ --------- --------
Net cash generated from operating
activities 3,376 4,288
--------------------------------------- ------ --------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (308) (1,175)
Purchase of intangible assets (375) (573)
Business acquisition (22,500) -
Interest received 6 48
Net cash utilised in investing
activities (23,177) (1,700)
--------------------------------------- ------ --------- --------
Cash flows from financing activities
Dividends paid (1,559) (1,558)
Repayment of borrowings (975) (975)
Principal elements of lease payments (500) (461)
Purchase of own shares (126) -
Shares purchased for share ownership
plan (110) (241)
Issue of shares net of issue costs 13,311 -
Shares acquired/sold by Employee
Benefit Trust (75) (138)
--------------------------------------- ------ --------- --------
Net cash generated from / (utilised
in) financing activities 9,966 (3,373)
--------------------------------------- ------ --------- --------
Decrease in cash and cash equivalents (9,835) (785)
Cash and cash equivalents at the
start of the period 12,706 13,541
Effect of exchange rate fluctuations
on cash held (31) (50)
--------------------------------------- ------ --------- --------
Cash and cash equivalents at the
end of the period 2,840 12,706
--------------------------------------- ------ --------- --------
1. Basis of preparation
The preliminary results of Eckoh plc have been prepared in
accordance with the recognition and measurement principles of UK
adopted international accounting standards in conformity with the
requirements of the Companies Act 2006 and effective at 31 March
2022. These statements do not constitute the Company's statutory
accounts within the meaning of section 435 of the Companies Act
2006 but have been derived from those accounts.
Statutory accounts for the year ended 31 March 2021 have been
delivered to the Registrar of Companies but those for the year
ended 31 March 2022 have not yet been delivered.
The auditors have reported on the accounts for the year ended 31
March 2022; their report was not qualified, did not include
references to any matters to which the auditors drew attention to
by way of emphasis without qualifying their report and did not
contain statements under section 498(2) or (3) of the Companies Act
2006.
Going concern
In determining the appropriate basis of preparation of the
Financial Statements, the Directors are required to consider
whether the Group and Company can continue in operational existence
for the foreseeable future.
The Board has carried out a going concern review and concluded
that the Group and Company have adequate cash to continue in
operational existence for the foreseeable future.
The Directors have prepared cash flow forecasts for a period in
excess of 12 months from the date of approving the Financial
Statements. As at 31(st) March 2022, the GBP10 million of funding
(GBP5 million RCF and GBP5 million overdraft) from Barclays Bank is
undrawn. Bank covenants have been reviewed and are comfortably
achieved for the year to 31(st) March 2022.
Our US operation is underpinned completely by fixed contractual
fees. In the UK, clients have a variety of commercial models
including fixed fees and transactional arrangements, with varying
levels of commitment.
In addition to our key business indicator, total orders and new
business orders, we have also introduced Annual Recurring Revenue
(ARR) to measure the health of the business, which includes all
clients that we are billing. In the US, we continue to see the
majority of the Secure Payments contracts won and delivered through
Eckoh's cloud platforms, as large enterprises have accelerated
their move into the cloud. Following the pandemic, we do not
anticipate this trend to reverse and whilst this reduces the
upfront payments (and cash received) for implementations, it
increases the proportion of recurring revenue and improves the
operational gearing, earnings quality and visibility in the
business. We anticipate the renewal rate for the UK and US
businesses to remain unchanged during this period. When preparing
the cash flow forecasts the Directors have reviewed a number of
scenarios, including the severe yet plausible downside scenario
which assumes no new business, with respect to levels of new
business. In all scenarios the Directors were able to conclude that
the Group has adequate cash to continue in operational existence
for the foreseeable future.
2. Segment analysis
Following the acquisition of Syntec Holdings Limited on 22(nd)
December 2021, the key segments reviewed at Board level are the UK
(including Eckoh Omni), US operations and Syntec. This will be
reviewed over the current year as Eckoh progress with the
integration of Syntec.
Information regarding the results of each operating segment is
included below. Performance is measured on operating segments based
on the information that internally is provided to the Executive
Management team, considered to be the Chief Operating Decision
Maker.
Current period segment Eckoh Eckoh Total Total
analysis UK US Syntec(1) 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment Revenue 18,596 11,487 1,697 31,780 30,486
----------------------------------- --------- -------- ------------ --------- ---------
Gross profit 15,593 8,473 1,357 25,423 24,195
Administrative expenses (14,399) (7,300) (1,338) (23,037) (20,645)
----------------------------------- --------- -------- ------------ --------- ---------
Operating profit 1,194 1,173 19 2,386 3,550
----------------------------------- --------- -------- ------------ --------- ---------
Adjusted operating profit 3,194 1,728 307 5,229 4,749
Other expenses(2) (2,000) (555) (289) (2,844) (1,199)
----------------------------------- --------- -------- ------------ --------- ---------
Operating profit 1,194 1,173 19 2,386 3,550
----------------------------------- --------- -------- ------------ --------- ---------
Profit before taxation 1,156 1,149 13 2,318 3,511
----------------------------------- --------- -------- ------------ --------- ---------
Segment assets
----------------------------------- --------- -------- ------------ --------- ---------
Trade and other receivables 2,904 2,059 749 5,712 5,389
Prepayments and contract
assets 2,798 954 2,819 6,571 7,888
Deferred tax asset 1,103 513 173 1,789 3,211
Segment liabilities
----------------------------------- --------- -------- ------------ --------- ---------
Trade and other payables 1,364 607 367 2,336 3,364
Accruals and contract liabilities 6,216 4,191 5,543 15,950 15,118
Capital expenditure
----------------------------------- --------- -------- ------------ --------- ---------
Purchase of tangible assets 187 120 1 308 1,066
Purchase of leases - 686 - 686 1,546
Purchase of intangible assets 375 - - 375 573
Depreciation and amortisation
----------------------------------- --------- -------- ------------ --------- ---------
Depreciation of property,
plant & equipment 525 130 25 680 704
Depreciation of leased assets 353 108 34 495 505
Amortisation 1,143 - - 1,143 1,061
1. Since date of acquisition of Syntec Holdings Limited on 22(nd) December 2021.
2. Other expenses include expenses relating to share option
schemes, amortisation of acquired intangible assets, exceptional
restructuring costs and costs from business combinations
In 2021/22 there was no one customer that individually accounted
for more than 10% of the total revenue of the continuing operations
of the Group. In 2020/21 there was one customer that individually
accounted for more than 10% of the total revenue of the continuing
operations of the Group.
Eckoh Eckoh
UK US Syntec 2022 Total 2021 Total
Revenue by geography GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- ----------- -----------
UK 18,117 - 739 18,856 17,804
United States of America 339 11,314 776 12,429 12,321
Rest of the World 140 173 182 495 361
-------------------------- -------- -------- -------- ----------- -----------
Total Revenue 18,596 11,487 1,697 31,780 30,486
-------------------------- -------- -------- -------- ----------- -----------
Eckoh Eckoh Total
UK US Syntec 2022 Total 2021
Timing of revenue
recognition GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- -----------
Services transferred
at a point in time 15,193 8,076 1,472 24,741 23,240
Services transferred
over time 3,403 3,411 225 7,039 7,246
---------------------- -------- -------- -------- -------- -----------
18,596 11,487 1,697 31,780 30,486
---------------------- -------- -------- -------- -------- -----------
The following table provides information about receivables,
contract assets and contract liabilities from contracts with
customers.
2022 2021
GBP'000 GBP'000
----------------------------------------- -------- ---------
Receivables, which are included in,
'Trade and other receivables 4,860 4,551
Contract assets which are included
in 'Trade and other Receivables' 3,828 4,359
Contract liabilities which are included
in 'Trade and other liabilities' (9,470) (11,347)
----------------------------------------- -------- ---------
(782) (2,437)
----------------------------------------- -------- ---------
Payment terms and conditions in client contracts may vary. In
some cases, clients pay in advance of the delivery of solutions or
services; in other cases, payment is due as services are performed
or in arrears following the delivery of the solutions or services.
Differences in timing between revenue recognition and invoicing
result in trade receivables, contract assets, or contract
liabilities in the statement of financial position.
Contract assets result when costs directly attributable to the
delivery of the hardware and the implementation fees are
capitalised as contract assets and released over the contract term,
thereby also deferring costs to later periods and revenue earnt not
yet invoiced.
Contract liabilities result from client payments in advance of
the satisfaction of the associated performance obligations and
relates primarily to revenue for hardware and implementation fees.
Contract liabilities are released as revenue is recognised.
Contract assets and contract liabilities are reported on a
contract by contract basis at the end of each reporting period.
Significant changes in the contract assets and contract
liabilities balances during the year are as follows:
31 March 2022
Contract Contract
assets liabilities
GBP'000 GBP'000
-------------------------------------------------- ---------- -------------
Revenue recognised that was included in
the contract liability balance at the beginning
of the period - 6,938
Current year billings recognised in contract
liabilities - 4,108
Cost of sales recognised that was included
in the contract assets balance at the beginning
of the period 2,640 -
Costs deferred in current year and unbilled
revenue included in contract assets 1,538 -
-------------------------------------------------- ---------- -------------
31 March 31 March
Contract costs 2022 2021
GBP'000 GBP'000
------------------------------ --------- ---------
Deferred implementation fees 1,028 1,698
Deferred hardware costs 510 316
------------------------------ --------- ---------
1,538 2,014
------------------------------ --------- ---------
Contract assets are capitalised as 'costs to fulfil a contract'
and are amortised when the related revenues are recognised, which
are spread evenly over the length of the contract, typically 3
years.
Transaction price allocated to the remaining performance
obligations
The total amount of revenue held in contract liabilities and
allocated to unsatisfied performance obligations is GBP9.5m (FY21:
GBP11.3m). We expect to recognise approximately GBP3.9m (FY21:
GBP5.4m) in the next 12 months, GBP5.5m (FY21: GBP5.9m) in 1-3
years and the remainder in 3 years or more in time.
The amount represents our best estimate of contractually
committed revenues that are due to be recognised as we satisfy the
contractual performance obligations in these contracts. A large
proportion of the Group's revenue is transactional in nature or is
invoiced monthly for support and maintenance and these are not
included in the contract liabilities.
Eckoh UK Eckoh US Total 2021
Prior period segment analysis GBP'000 GBP'000 GBP'000
Segment revenue 18,037 12,449 30,486
------------------------------- --------- --------- -----------
Gross profit 15,299 8,896 24,195
Administrative expenses (13,022) (7,623) (20,645)
------------------------------- --------- --------- -----------
Operating profit 2,277 1,273 3,550
------------------------------- --------- --------- -----------
Adjusted operating profit 3,069 1,680 4,749
Other expenses(1) (792) (407) (1,199)
------------------------------- --------- --------- -----------
Operating profit 2,277 1,273 3,550
------------------------------- --------- --------- -----------
Profit before taxation 2,285 1,226 3,511
------------------------------- --------- --------- -----------
Segment assets
------------------------------- --------- --------- -----------
Trade and other receivables 2,648 1,903 4,551
Deferred tax asset 2,699 512 3,211
Segment liabilities
------------------------------- --------- --------- -----------
Trade and other payables 2,565 798 3,364
Capital expenditure
------------------------------- --------- --------- -----------
Purchase of tangible assets 698 368 1,066
Purchase of leases 1,138 408 1,546
Purchase of intangible assets 573 - 573
Depreciation and amortisation
------------------------------- --------- --------- -----------
Depreciation of property,
plant & equipment 542 162 704
Depreciation of leased assets 408 97 505
Amortisation 665 396 1,061
1. Other expenses include expenses relating to share option
schemes and amortisation of acquired intangible assets.
Eckoh UK Eckoh US 2021
GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- --------
Revenue by geography
UK 17,804 - 17,804
United States of America - 12,321 12,321
Rest of the World 233 128 361
-------------------------- --------- --------- --------
Total Revenue 18,037 12,449 30,486
-------------------------- --------- --------- --------
3. Earnings per share
The basic and diluted earnings per share are calculated on the
following profit and number of shares. Earnings for the calculation
of earnings per share is the net profit attributable to equity
holders of the parent.
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Earnings for the purposes of basic and diluted
earnings per share 1,575 2,794
------------------------------------------------ -------- --------
Earnings for the purposes of adjusted basic
and diluted earnings per share 4,181 3,814
------------------------------------------------ -------- --------
Reconciliation of earnings for the purposes of adjusted basic
and diluted earnings per share
2022 2021
GBP'000 GBP'000
------------------------------------------------ -------- --------
Earnings for the purposes of basic and diluted
earnings per share 1,575 2,794
Taxation 743 717
Amortisation of acquired intangible assets 751 663
Expenses relating to share option schemes 241 536
Exceptional restructuring costs 866 -
Costs relating to acquisition 985 -
------------------------------------------------ -------- --------
Adjusted profit before tax 5,161 4,710
Tax charge based on standard corporation tax
rate of 19% (2021: 19%) (980) (895)
------------------------------------------------ -------- --------
Earnings for the purposes of adjusted basic
and diluted earnings per share 4,181 3,815
------------------------------------------------ -------- --------
2022 2021
Denominator '000 '000
----------------------------------------------- -------- --------
Weighted average number of shares in issue
in the period 265,968 255,351
Shares held by employee ownership plan (2,028) (1,862)
Shares held in Employee Benefit Trust - -
----------------------------------------------- -------- --------
Number of shares used in calculating basic
earnings per share 263,940 253,489
Dilutive effect of share options 20,558 9,426
Dilutive effect of shares for acquisition Dec
21 7,889 -
Dilutive effect of placing Dec 21 18,494 -
----------------------------------------------- -------- --------
Number of shares used in calculating diluted
earnings per share 310,881 262,915
----------------------------------------------- -------- --------
2022 2021
Profit per share pence Pence
------------------------------------------- ------ ------
Basic earnings per 0.25p share 0.59 1.09
Diluted earnings per 0.25p share 0.51 1.06
Adjusted earnings per 0.25p share 1.57 1.49
Adjusted diluted earnings per 0.25p share 1.34 1.45
4. Cashflow from operating activities
2022 2021
GBP'000 GBP'000
----------------------------------------------- -------- --------
Profit after taxation 1,575 2,794
Interest income (6) (48)
Interest payable 74 87
Taxation 743 717
Depreciation of property, plant and equipment 680 704
Depreciation of leased assets 495 505
Amortisation of intangible assets 1,143 1,061
Exchange differences (95) 522
Share based payments 241 536
----------------------------------------------- -------- --------
Operating profit before changes in working
capital and provisions 4,850 6,878
(Increase) / decrease in inventories (5) 138
Decrease in trade and other receivables 2,423 217
Decrease in trade and other payables (3,906) (2,848)
Net cash generated in operating activities 3,362 4,385
----------------------------------------------- -------- --------
5. Business Combinations
On 22 December 2021 the Group completed the acquisition of
Syntec Holdings Limited for GBP31.0 million, through a combination
of a cash consideration of GBP24.7 million with the balance of
GBP6.3 million payable in new Eckoh shares. The deal was legally
structured via the acquisition of 100% of the top holding company
of Syntec Holdings Limited and its subsidiaries.
Syntec is an Ofcom-regulated UK network operator, based in the
UK, with an extensive patent portfolio in the UK, US, EU and
Australia. Syntec is a provider of secure payment solutions (under
the brand CardEasy) with additional telecom and contact centre
services provided predominantly in the UK.
Costs relating to the acquisition were GBP1.6 million, GBP0.6
million of costs relating to the issue of shares have been offset
against funds raised in the share premium account, the remainder
GBP1.0 million of costs have been expensed as incurred and treated
as exceptional items.
Post-acquisition results of the acquired business for the year
ended 31 March 2022 are included in the Group Consolidated
Financial Statements. Revenue of GBP1.7 million and operating
profit of GBP0.3 million relate to the acquired business. If the
acquisition of Syntec Holdings Limited had been completed on the
first day of the financial year, revenue included for the year
would have been GBP5.8 million and operating profit included would
have been GBP1.0 million.
The fair values of the identifiable asset and liabilities at the
acquisition date are set out below:
GBP000
-------------------------------------------- --------
Tangible assets 235
Intangible assets - Customer Relationships 12,367
Right-of-use leased assets 686
Deferred tax asset 91
Stock 89
Debtors 1,430
Cash at bank and in hand 2,197
Creditors due within one year (3,940)
Creditors due after one year (694)
Deferred tax liability (2,888)
Fair value of net assets acquired 9,575
Goodwill 21,422
-------------------------------------------- --------
Total consideration 30,997
-------------------------------------------- --------
Satisfied by
Cash 24,697
Shares 6,300
-------------------------------------------- --------
Total Purchase consideration 30,997
-------------------------------------------- --------
Net cash outflow arising on acquisition
Cash consideration 24,697
Less: cash and cash equivalent
balance acquired (2,197)
Cash outflow from investing activities 22,500
-------------------------------------------- --------
The goodwill of GBP21.4 million comprises primarily the
estimated value of a combination of the cross-selling opportunities
for Eckoh's products into Syntec's CardEasy clients and vice versa.
These are not included in the Intangible Assets - Customer
Relationships above. The goodwill also comprises the benefits that
will be derived from the combined product as set out in the
Operational Review, in the section setting out the approach to
'Syntegration', the aim of which is to bring the best of Eckoh and
Syntec existing product and technologies together to build a
unified platform and roadmap for future new capability. The
goodwill will not be tax deductible for tax purposes.
6. Events after the Statement of Financial Position Date
As at the date of these statements there were no such events to
report.
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